Broker News

Loans to investors jump

By CommSec

Housing finance

Home loans: The number of loans (commitments) for budding home owners (owner-occupiers) rose by 0.9 per cent in November after falling by 0.6 per cent in October. It was only the second rise in lending in five months.

The value of loans rose by 2.2 per cent in November with owner loans up 0.4 per cent and investor loans up 4.9 per cent.

What does it all mean?

On its own, the lift in home loans doesn’t look overly concerning – especially given it was only the second rise in the past five months. But couple it with the lift in home prices in the latter part of last year and it suggests that the housing landscape may continue to cause policymakers a little bit of angst over 2017. Even more so when you delve a bit deeper into the data and realise that the lift in the value of loans was largely driven by investors. The value of loans by investors surged by 4.9 per cent in November to be up 21.4 over the year – the strongest annual growth in 19 months.

If home prices continue to lift, with growth largely driven by investor loans, regulators may look at further restrictions to curb lending.

What do the figures show?

Housing finance - number

The number of loans (commitments) for budding home owners (owner-occupiers) rose by 0.9 per cent in November after falling by 0.6 per cent in October. It was only the second rise in lending in five months. Excluding the refinancing of dwellings, the number of loans was up by 2.1 per cent.

The number of new home loans was down by 2.6 per cent on a year ago.

Loans by owner-occupiers for the construction of homes rose by 2.3 per cent in November.

Loans to buy newly-erected dwellings rose by 3.3 per cent.

Loans for the purchase of established dwellings (excluding refinancing) rose by 2.0 per cent.

The number of refinancing transactions fell by 1.2 per cent.

Lending across states/territories in November: NSW (+1.5 per cent); Victoria (+0.8 per cent); Queensland (+2.4 per cent); South Australia (-1.3 per cent), Western Australia (-0.7 per cent); Tasmania (-1.0 per cent); Northern Territory (+2.7 per cent); ACT (+0.2 per cent).

Housing finance - value

The value of new housing commitments (owner occupier and investment) rose by 2.2 per cent in November after rising by 0.5 per cent in October. Owner-occupier loans rose by 0.4 per cent but investment loans rose by 4.9 per cent.

The value of loans by owner-occupiers and investors to build new homes rose by 14.2 per cent in November after falling by 1.7 per cent in October. The value of loans to build new homes rose to an 8-month high of $3.07 billion in November.

Housing finance – other statistics

The proportion of first-time buyers in the home loan market rose from 13.7 per cent to 13.8 per cent in November (long-term average 19.4 per cent).

The proportion of fixed rate loans eased from 12.8 per cent to 12.5 per cent in November. And the average home loan across Australia stood at $376,600 in November, up 3.6 per cent in the month but down 1.6 per cent on a year ago.

What is the importance of the economic data?

Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.

What are the implications for interest rates and investors?

Looking forward, policymakers will keep a close eye on how the rebalancing of the domestic economy (away from mining investment) is keeping pace. Inflation and housing activity are likely to be closely watched over 2017.